In April 2020, the government are planning to make changes to the employment allowance. Since 2014 many businesses have been able to claim £3,000 per year as a deduction against Class 1 NI, but from April things are changing!
Here is a quick summary
- Employers won’t automatically qualify for the EA (Employment Allowance) and must claim it each year. This will mean submitting a declaration confirming that you’ve checked and qualify by meeting the eligibility conditions.
- Employer with more than £100k of Class 1 NI won’t qualify
- Connected employers won’t qualify – sharing staff, premises or other resources
- EA will be counted as State Aid and the maximum state aid allowed is 200,000 euros
So even if items 2 to 4 don’t apply, item 1 will apply to every business wanting to make a claim.
What has changed
You can now get relief on purchases made on or after 1 April 2019 if the:
- goodwill and relevant assets are purchased when you buy a business with qualifying intellectual property (IP)
- business is liable to Corporation Tax
- relevant assets (including goodwill) are included in the company accounts
Find a full definition of goodwill and relevant assets on GOV.UK in the Corporate Intangibles Research and Development Manual CIRD44060.
Relief you can get
Relief is a fixed rate of 6.5% a year on the lower of the cost of the relevant asset or 6 times the cost of any qualifying IP assets in the business purchased.
Relief is given yearly until the limit is reached. More information about how to work out the relief can be found on GOV.UK in the Corporate Intangibles Research and Development Manual CIRD44093.
How to claim
You must complete a Company Tax Return and include the relief. This will reduce both:
- your company or organisation’s taxable profit
- the amount of Corporation Tax you have to pay